China Proves Rare Earth Minerals are the new Oil

Rare Earth Minerals are growing in demand, becoming a necessary and controversial commodity in today’s tech production.Their status as a natural resource that is essential to the advancement of defense, tech, and clean energy will only be elevated as technology advances.

Although the REM trade has sparked backlash from environmental watch dogs, it’s becoming more apparent that they are taking hold as the “new oil” in the natural commodities market.

REMisnomers

Rare Earth Minerals (REMs) consist of 17 elements from the periodic table. They are plentiful in the Earth’s crust and are often found concentrated near each other. They are classified into subgroups by weight, some being “heavier” and thus more valuable than others.

REEs or REMs | Geology.com

What makes REMs so rare isn’t their quantity on earth, which is abundant; instead, it’s the amount of time and energy it takes to extract them.

REMs are extremely concentrated, which means that “producers churn through mountains of material just to get a cup of product” in the mines.

Their yields are low, and at the moment, the general consensus is that they will be necessary for tech development for the foreseeable future.

Dirty Cleantech and More

The messy process of extracting REMs comes at a huge environmental cost.

In Baotou, China – the biggest REM mining facility in the world – the effects of the industry have had an impact on the city by causing massive population growth in only two years coupled with visible environmental destruction.

Even on a more personal level, sixteen of the seventeen REMs are used in the production of in screens, smartphones, batteries, headphones, and sensors. They are the reasons why our high tech devices are portable, thin, and compact.

Playing Monopoly With China

Beyond environmental concerns and their counterpoints, many are worried about the economic risks that are involved in mining. The initial investments are very high, and the yields are exceedingly low, even for many of the most successful mines.

On top of it being difficult to open up a mine, the only way to have a competitive edge against China is to lower labor costs.

That, in addition to the negative environmental toll, has made it so that Molycorp, the U.S.’s only REM mining operation was basically shut down by the EPA.

What few mines there are in countries besides China are limited and risky investments.

Considering Trump’s new EPA restructuring, regulation in the US may no longer be an impediment.

But, even if we had an operational mine like Molycorp’s, we would still be at least a decade behind China with regard to the infrastructure needed to refine and manufacture REMs into consumer electronics.

If Molycorp were to start back up tomorrow and produce immediately, we would still have to ship the REM to China for refinement and production. Basically, the U.S.’s lag in developing REM extraction and refinement infrastructure and China’s willingness to do the dirty work required to acquire them has created a situation where China is like a one-man OPEC.

China, on the other hand, has majority market share control over REM extraction, refining and manufacturing.

Even back in 1992, Deng Xiaoping, the former leader of the Communist Party of China, remarked that “The Middle East has oil and China has rare earth.”

So far, trade seems to be the only solution to accumulating more REMs, since mining infrastructure is not a feasible method of attaining REMs at the moment. The U.S. has begun stockpiling REMs since they have value in almost every emerging market in technology and play a role in national defense.

Though it is not likely possible for countries in North America or Europe, which have higher labor costs and environmental regulations to invest in REM mining, there is a potential for emerging markets in Africa, India, and other parts of Asia.

Still, there is a need for investors who are not only willing, but able to take on the risk to compete with China. With the People’s Republic producing 90% of REMs in the world, the country will continue to control the market for the foreseeable future- even with new mines popping up around the globe.